A young French chemist named Eugène Schueller created a hair dye named Auréale in the kitchen of his Paris apartment in 1907. With a limited range of shades and a chemical rawness that betrayed its modest origins, the colorant was far from perfect, but it was a start.

Soon Schueller had registered his company and, by 1939, he had renamed it – in a nod to his first product – L'Oréal. By the end of the 20th century, the one-man, shoestring operation was no more. In its place was the largest and most powerful cosmetics brand in the world.

For the little girl who grew up as Schueller's devoted only child, the upkeep of the L'Oréal business was more than a professional duty; it was a personal commitment to him and to their tightly bound family. Even later reports of his Nazi collaboration and virulent antisemitism could not shake her filial loyalty. "I am, first and foremost, the daughter of a father," she said in 2005.

What would Schueller make of his daughter's predicament today? Now aged 87 and the richest woman in France, Liliane Bettencourt is presiding over a warring clan whose venomous dispute is threatening the very company she swore to Schueller she would protect.

A three-year row has estranged her from her only daughter and laid bare the unpalatable realities behind the gloss of the Parisian elite. It has also threatened the credibility of the French government and, crucially, placed a question mark over the future of L'Oréal itself.

In 2007, Françoise Bettencourt Meyers, the discreet intellectual daughter of the ageing heiress, filed a lawsuit against François-Marie Banier, a photographer whom she claimed had been preying on her mother for money – €1bn (£845m), no less. Bettencourt Meyers's move to sue him and have her mother declared legally incompetent to manage her own affairs provoked fury from the L'Oréal matriarch and the bile began spilling.

The family affair soon became an affair of state: last month secret tapes recorded by the Bettencourt butler were released as evidence for the Banier trial and proved to be political dynamite. The transcripts appeared to show systematic tax evasion on the part of the doyenne and her advisers; the name of the French labour minister was heard frequently, as well as that of his wife who, it transpired, had been working on Bettencourt's finances.

Finally, in a dramatic plot twist to the sensational soap opera gripping Paris, the minister in question was alleged to have received a large – and illegal – donation to the presidential campaign of Nicolas Sarkozy.

Amid all this sound and fury, however, there is only one thing Liliane Bettencourt considers worth getting worried about: the future of L'Oréal. "For 40 years I have devoted myself to my role as the chief shareholder of the leading cosmetics group in the world," said the billionaire last week in a defiant statement issued from her residence in rural Brittany. "I intend to continue with this task and hope that my daughter will not destabilise this group, which my father and I wanted to be French."

Directed unapologetically at her outcast offspring, those last words were a thinly veiled warning. For, while L'Oréal the business has for the moment remained unaffected by the whiff of scandal blowing through Paris, there are growing fears that this will not remain the case for long.

In its current form, the cosmetics juggernaut that is L'Oréal has two major shareholders: first and foremost, the Bettencourt family, with a 31% stake, and, second, the Swiss food giant Nestlé, with 30%.

The arrangement dates from 1974, when a nervous Liliane took steps to avert the threat of nationalisation which a presidential election victory for the youthful left-winger François Mitterrand could, she feared, bring with it. (As it happened, she need not have bothered – at least not for another seven years.)

Fast forward 35 years and the existence of a foreign influence within a national treasure is cause for concern rather than reassurance. Neither Nestlé's chief executive, Paul Bulcke, nor the Bettencourts have said there are any plans to change the status quo; indeed they have rejected such speculation outright.

But such has been the dynamite effect of "L'affaire" in recent weeks that no one can be sure the L'Oréal that emerges from the saga will look the same as the company that went in. And it is Bettencourt Meyers, the academic more interested in writing books on the Greek gods than presenting herself as the face of the glamorous brand, who is the focus of attention.

Bettencourt Meyers, 57, who already has partial control of her mother's €16bn share in the company and will inherit fully after her death, is suspected by Bettencourt's advisers of orchestrating an exit strategy for herself and the company that would involve selling the stake to Nestlé. Try as she might to deny it, the whispering campaign is gathering momentum.

Last week, even Sarkozy alluded to the possibility. "I would like her [Liliane Bettencourt] to remain the owner of L'Oréal… and L'Oréal not to leave for another country," said the president in a television interview. The message was clear: keep L'Oréal – its jobs, its know-how, its prestige – for the French.

"L'Oréal is first of all a very valuable CAC40 [a benchmark of value on the French stock market] company, but it is also a kind of jewel, a symbol of French success," said Béatrice Collin, author of Le ModèleL'Oréal, a French bestseller that analysed the company. "It has proved to be a leader in its sector, a global success for France… And of course it is all about luxury and beauty and that, that is France."

Yet Collin believes it is a "real possibility" that the Swiss shareholder could eventually take control of the Gallic giant. Should the Bettencourt family ever decide it wished to sell its stake, it would be obliged to approach Nestlé before any other bidder and vice-versa.

Many analysts believe that a Nestlé takeover is unlikely. Pointing to a new shareholder agreement drawn up last year, which allows the Swiss to get rid of their stake whenever they like, they say this is now a greater possibility given the business's growing focus on the food, and not cosmetics, sector.

Or maybe, even if Bettencourt were to be declared incompetent, the status quo would continue. Her daughter, who says she is "viscerally attached" to the company, insists this is the case. "Selling up one day?" she asked in an interview earlier this year. "That would be a betrayal."

She will have to fight hard, however, to emerge unscathed by the battle she is waging on her mother's camp – a close circle of men Bettencourt Meyers has denounced as "cult-like" in their efforts to separate the elderly woman from her family. "I have only one aim: to get my mother back," she has said.

But that does not look close to happening. Her mother's clan retort simply that Françoise is merely jealous, motivated by hatred for a man who has everything she does not – charisma, vivaciousness, and the affection of Liliane. She is, they say, trying to get her own back by attempting to wrest control of the business from her mother. Her husband, Jean-Pierre Meyers, who sits on the boards of both Nestlé and L'Oréal, is regarded with suspicion.

"My life is my life," the octogenarian told French television last week, accusing her daughter of seeking only to "look after herself", adding "I am saddened and upset because I ask myself how, after so many years, someone who grew up near me had such petty reactions."

Françoise is not the only one, however, to question the motives of the figures around her mother. When asked why he had bothered to record around 100 hours of conversations from within his employer's Parisian mansion, former butler Pascal Bonnefoy replied that he had been scared for her. He could "no longer bear", he said, to see her "abused by people without scruples".

From the tapes, which prompted the abrupt adjournment of Banier's trial, a picture is painted of Machiavellian manoeuvrings and toe-curling toadying, of shameless greed and antisemitic undertones. The recordings also brought to light suggested tax evasion, which Bettencourt immediately vowed to "regularise". In the tapes, she is often heard to be befuddled or confused. Some say she is merely deaf; others claim she is losing her faculties.

Other parts of the transcripts suggest that Sarkozy, apparently concerned by a verdict against Banier, tried to prevent the case coming to court at all. The Elysée has denied this. But, if true, why would the president have cared so much? Was it, as some observers have suggested, because he had allegedly received a substantial donation from the Bettencourt family and did not want that to be made public? (This allegation has been dismissed as baseless by the president's staff.)

Or were his concerns for L'Oréal itself, for its Gallic roots and its uncertain future? As proved by his remarks last week, the president is undoubtedly concerned. With its 67,000 jobs worldwide and a net profit, last year, of €1.79bn, the company is more than just a business; it is a part of the national psyche. To lose it would be a heavy blow for France.

For the time being, then, with the trial adjourned, the family tragedy-cum-farce will no doubt continue to entertain and appal in equal measure. A French producer, Thomas Langmann, announced on Friday he was planning a film version of the saga; Jeanne Moreau, he said, "would be marvellous" in the lead role as Liliane. But what the denouement will be – for the heroine and for her inheritance – is anybody's guess.